10/11/09
While driving my daughter and one of her friends back from a soccer game this morning, I heard one of those now ubiquitous public service announcements regarding H1N1. (Remember when we used to call H1N1 swine flu? One can only conclude that political correctness, and raising regard for the feelings of others beyond all other considerations, now extends to livestock. But I digress.) The message alerted the citizenry to do three things to avoid H1N1:
--cough into one’s elbow or a kleenex
--stay home from work if one feels ill, and
--wash one’s hands frequently with soap and water.
No one means to minimize the danger of the H1N1 outbreak, or, at this stage, epidemic. The number of people infected with this very dangerous disease has reached record levels and is almost certain to increase, causing untold human misery and horrible strain on our medical system. H1N1 has hit uncomfortably close to home with last Thursday’s tragic death of my daughter’s Naperville North classmate, Michelle Fahle. All of us are affected, some more than others, by H1N1, and we would all help ourselves and our neighbors by taking common sense precautions.
As cognizant and respectful as I am of the very real dangers of H1N1, as one with libertarian leanings and what some would describe as an obsessive concern with personal hygiene, I have to ask…
What has come of our society when the government has to tell us to wash our hands?
Sunday, October 11, 2009
“BUT GENERAL TURGIDSON, I AM THE ONLY ONE WHO HAS AUTHORITY TO ORDER THE USE OF NUCLEAR WEAPONS…’
10/11/09
Last week, General Stanley McChrystal, the U.S. military commander in Kabul, sent his superiors three possible options for pursuit of the Bush/Obama war in Afghanistan. The first is to keep troop levels in Afghanistan about where they are, at 68,000 troops. The second option, and that preferred by General McChrystal, is to increase troop strength by 40,000 soldiers. The third, designed to make the General’s preferred option look sane by comparison, is to commit 60,000 additional troops to this hopeless conflict in that great graveyard of empires in Central Asia.
Fans of the Afghanistan war, primarily, but not exclusively, Republicans, are urging the President to “go with the general.” After all, they argue, he is a military man and knows what he is doing.
Hmm…
The defense of our country is the most important and most defensible duty of our government. Therefore, even though our political and military leadership has strayed from that task for at least the last sixty years, and the expansion of the military’s role has picked up considerably under the Bush/Obama administration, the military top brass are the most important bureaucrats in the federal government. However, they are only that…the most important bureaucrats in our government. As bureaucrats, the generals and admirals behave as bureaucrats do: they seek to expand their power and influence by increasing the numbers of people and dollars under their control. Therefore, if decisions on deployment and troop levels were left in the hands of the military because, after all, they are military people, and especially because four of our last five presidents have no real military experience, we would forever be increasing troop levels in places where our forces are already deployed and constantly looking for new places to deploy troops. After all, the bigger and more engaged the military, the greater the power of the military leadership. This is natural bureaucratic behavior.
The Founding Fathers were smart enough to understand the bureaucratic mindset. They further understood that wars had emptied the treasuries and decimated the young, promising generations of the monarchies of the old Europe from which our infant Republic sought a clean break. The Founding Fathers also knew that the most important liberty of which the state could deprive a citizen was his or her life. Those are some of the reason the Founders weren’t about to let the generals decide issues of war and peace and so put a civilian, the president of the United States, in charge of the military. While the GOP, in its curious and horribly misguided insistence on equating militarism with patriotism and conservatism, seems to have forgotten this, civilian control of the military is one of the paramount pillars of our Republic, and it has done as much to guard our liberty as have the actions our military has been ordered to undertake by our civilian leadership.
Last week, General Stanley McChrystal, the U.S. military commander in Kabul, sent his superiors three possible options for pursuit of the Bush/Obama war in Afghanistan. The first is to keep troop levels in Afghanistan about where they are, at 68,000 troops. The second option, and that preferred by General McChrystal, is to increase troop strength by 40,000 soldiers. The third, designed to make the General’s preferred option look sane by comparison, is to commit 60,000 additional troops to this hopeless conflict in that great graveyard of empires in Central Asia.
Fans of the Afghanistan war, primarily, but not exclusively, Republicans, are urging the President to “go with the general.” After all, they argue, he is a military man and knows what he is doing.
Hmm…
The defense of our country is the most important and most defensible duty of our government. Therefore, even though our political and military leadership has strayed from that task for at least the last sixty years, and the expansion of the military’s role has picked up considerably under the Bush/Obama administration, the military top brass are the most important bureaucrats in the federal government. However, they are only that…the most important bureaucrats in our government. As bureaucrats, the generals and admirals behave as bureaucrats do: they seek to expand their power and influence by increasing the numbers of people and dollars under their control. Therefore, if decisions on deployment and troop levels were left in the hands of the military because, after all, they are military people, and especially because four of our last five presidents have no real military experience, we would forever be increasing troop levels in places where our forces are already deployed and constantly looking for new places to deploy troops. After all, the bigger and more engaged the military, the greater the power of the military leadership. This is natural bureaucratic behavior.
The Founding Fathers were smart enough to understand the bureaucratic mindset. They further understood that wars had emptied the treasuries and decimated the young, promising generations of the monarchies of the old Europe from which our infant Republic sought a clean break. The Founding Fathers also knew that the most important liberty of which the state could deprive a citizen was his or her life. Those are some of the reason the Founders weren’t about to let the generals decide issues of war and peace and so put a civilian, the president of the United States, in charge of the military. While the GOP, in its curious and horribly misguided insistence on equating militarism with patriotism and conservatism, seems to have forgotten this, civilian control of the military is one of the paramount pillars of our Republic, and it has done as much to guard our liberty as have the actions our military has been ordered to undertake by our civilian leadership.
Wednesday, October 7, 2009
“YA GOTTA BUY REAL ESTATE; AFTER ALL, THEY’RE NOT MAKIN’ ANY MORE OF IT!”
10/7/09
This morning’s (i.e., Wednesday, 10/7’s) Wall Street Journal reports that a real estate expert at the Atlanta Fed, Mr. K.C. Conway, who, one might think, judging from his name, but apparently not the intensity of his insight, should have pursued a career either as an NFL running back or an R&B singer, has issued a report on the impact the cratering of the commercial real estate market will have on banks. Among other insightful observations, the report states:
“Banks will be slow to recognize the severity of the loss—just as they were in residential (real estate).”
A much more highly placed, but much less beneficially named, Fed official, New York Fed President Bill Dudley, confirmed the wisdom of Mr. Conway’s observations in a speech Monday in which he said
“More pain likely lies ahead for this (the commercial real estate) sector and for those banks with heavy commercial real estate exposures.”
The Journal further reports that, based on its analysis of data from 800 banks, commercial banks had, at the end of the second quarter of this year, 38 cents in reserves for every dollar of bad commercial real estate loans. This was down from $1.58 in reserves for every dollar in bad commercial loans at the beginning of 2007. Apparently, we have a case of non semper paratus, unless, of course, commercial real estate is turning around. But all one has to do is turn off CNBC and drive down one’s local commercial strip to see how badly commercial real estate is hurting.
None of this should surprise anybody, especially readers of the Insightful Pontificator. I was not the only one sounding the alarm bell on the commercial real estate front when, in my 4/20/09 post, I stated:
Even if the housing market is improving, some combination of the following four should blow up in the next several months with devastating consequences both for the real economy and for the psyche of investors who really think we have turned the corner on the aftermath of a twenty year display of financial foppery:
--life insurance companies, primarily through their variable life and annuity contracts.
--credit cards—big time.
--municipal bonds
--commercial real estate
These have already blown up, you say? Think again.
If Messrs. Conway, Dudley, and Quinn are right, we may soon have to live through the same financial dystopia that we experienced last year. Why? Because, in what has become a new recurring theme in the Insightful Pontificator, some people never learn. They simply react and chant.
In other hopeful economic news of the type I find useful, I have seen no decrease in “For Sale” signs in the ultimate suburb in which I live. These signs are spread across virtually every pricing point available out here, but the preponderance of such advertising lies in the ostentatious “McMansion” sector of the market. Some of these monstrosities for sale are of the unoccupied variety, but more seem to be occupied, presumably of the “I just had to buy more house than I could afford because I finally got a few bucks ahead and had to display my wealth but wound up only displaying my economic and financial illiteracy” variety. This is not to say that more homes are for sale than ever before in Naperville, only that I am seeing more “For Sale” signs than ever before. And I like anecdotal evidence.
Also on the anecdotal front, a friend and I are in the habit of having lunch weekly and discussing the world’s problems and our brilliant, but unheeded, solutions thereto. Usually, our choice of restaurants is dictated by the availability of coupons, and whenever they have a “Buy one meal, get one free” coupons, we generally choose our local IHOP. The food is good, the service is terrific, my iced tea glass is never allowed to run dry, and the prices, while very high without a coupon, are reasonable with a coupon. The “busy-ness” of IHOP, and similar restaurants, has been a near perfect economic indicator for me, ebbing and flowing just ahead of the vicissitudes of the economy. After seeming to perk up during the last round of coupon availability, about two months ago, business at IHOP has been down, and down big, in this latest round of coupon availability, which started three weeks ago. In fact, we have never seen the restaurant as dead as it was yesterday.
So the commercial real estate market has not stopped plummeting, the housing market, at least at the upper middle end, still stinks, and the IHOP indicator has never been more negative. Yet stocks are up well over 50% from their bottom. Something isn’t right here.
This morning’s (i.e., Wednesday, 10/7’s) Wall Street Journal reports that a real estate expert at the Atlanta Fed, Mr. K.C. Conway, who, one might think, judging from his name, but apparently not the intensity of his insight, should have pursued a career either as an NFL running back or an R&B singer, has issued a report on the impact the cratering of the commercial real estate market will have on banks. Among other insightful observations, the report states:
“Banks will be slow to recognize the severity of the loss—just as they were in residential (real estate).”
A much more highly placed, but much less beneficially named, Fed official, New York Fed President Bill Dudley, confirmed the wisdom of Mr. Conway’s observations in a speech Monday in which he said
“More pain likely lies ahead for this (the commercial real estate) sector and for those banks with heavy commercial real estate exposures.”
The Journal further reports that, based on its analysis of data from 800 banks, commercial banks had, at the end of the second quarter of this year, 38 cents in reserves for every dollar of bad commercial real estate loans. This was down from $1.58 in reserves for every dollar in bad commercial loans at the beginning of 2007. Apparently, we have a case of non semper paratus, unless, of course, commercial real estate is turning around. But all one has to do is turn off CNBC and drive down one’s local commercial strip to see how badly commercial real estate is hurting.
None of this should surprise anybody, especially readers of the Insightful Pontificator. I was not the only one sounding the alarm bell on the commercial real estate front when, in my 4/20/09 post, I stated:
Even if the housing market is improving, some combination of the following four should blow up in the next several months with devastating consequences both for the real economy and for the psyche of investors who really think we have turned the corner on the aftermath of a twenty year display of financial foppery:
--life insurance companies, primarily through their variable life and annuity contracts.
--credit cards—big time.
--municipal bonds
--commercial real estate
These have already blown up, you say? Think again.
If Messrs. Conway, Dudley, and Quinn are right, we may soon have to live through the same financial dystopia that we experienced last year. Why? Because, in what has become a new recurring theme in the Insightful Pontificator, some people never learn. They simply react and chant.
In other hopeful economic news of the type I find useful, I have seen no decrease in “For Sale” signs in the ultimate suburb in which I live. These signs are spread across virtually every pricing point available out here, but the preponderance of such advertising lies in the ostentatious “McMansion” sector of the market. Some of these monstrosities for sale are of the unoccupied variety, but more seem to be occupied, presumably of the “I just had to buy more house than I could afford because I finally got a few bucks ahead and had to display my wealth but wound up only displaying my economic and financial illiteracy” variety. This is not to say that more homes are for sale than ever before in Naperville, only that I am seeing more “For Sale” signs than ever before. And I like anecdotal evidence.
Also on the anecdotal front, a friend and I are in the habit of having lunch weekly and discussing the world’s problems and our brilliant, but unheeded, solutions thereto. Usually, our choice of restaurants is dictated by the availability of coupons, and whenever they have a “Buy one meal, get one free” coupons, we generally choose our local IHOP. The food is good, the service is terrific, my iced tea glass is never allowed to run dry, and the prices, while very high without a coupon, are reasonable with a coupon. The “busy-ness” of IHOP, and similar restaurants, has been a near perfect economic indicator for me, ebbing and flowing just ahead of the vicissitudes of the economy. After seeming to perk up during the last round of coupon availability, about two months ago, business at IHOP has been down, and down big, in this latest round of coupon availability, which started three weeks ago. In fact, we have never seen the restaurant as dead as it was yesterday.
So the commercial real estate market has not stopped plummeting, the housing market, at least at the upper middle end, still stinks, and the IHOP indicator has never been more negative. Yet stocks are up well over 50% from their bottom. Something isn’t right here.
Monday, October 5, 2009
WHEN WILL WE EVER LEARN?
10/5/09
This morning’s (i.e., Monday, 10/5/19’s) Wall Street Journal reports on the increasing trend of corporations’ borrowing not to invest in operations, or even to buy other companies, but, rather, to pay dividends, often special (i.e., one time, and usually very large) dividends, to shareholders. Such leveraging up to reward the shareholders was quite the rage in the past, especially for companies whose shareholders were private equity firms who, of course, were interested primarily in restoring the “competitiveness” of, and rooting out the waste in, the companies they acquired. Financial engineering, we were assured, was a mere afterthought, if it entered into the thought processes of the private equity wunderkinds at all. The Journal article cited the case of Dex Media, which borrowed heavily to pay a special dividends to its private equity owners, including Thomas H. Lee Partners, Bain Capital, and the Blackstone Group (which recently announced plans to purchase SeaWorld—Orca meat, anyone?). Dex later filed bankruptcy because it could not service the debt it took on to pay these groups that did so much to enhance its competitiveness and keep management on its toes. Lee, Bain, and Blackstone kept the money.
In illustrating this atavistic trend toward stiffing bondholders to pay shareholders The Journal cited the case of TransDigm Group, Inc.’s decision to borrow $425mm to pay a $360mm special dividend to shareholders, increasing debt from 3.1 times EBIT (earnings before interest and taxes) to 4.3 times EBIT. The new debt will get a rating of B3, pretty close to the bottom rungs of the junk ladder. Good luck with that, TransDigm.
While all this might seem appalling, even to those like yours truly, who a long time ago made his living in the junk bond market, it is a natural response to public policy. The Bush/Obama administration, along with its flunky at the Fed, Obsequious Ben Bernanke, decided that the proper response to a crisis that arose from too much borrowing was to make it easier to borrow. The Fed drove interest rates on super safe short term treasuries to record lows. As the economy recovered, spreads tightened, allowing corporations relatively easy access to cheap money. The companies, faced with such cheap money, made a perfectly rational decision to lever up their balance sheets. So such leveraging makes sense from a micro standpoint, especially when, as is the case, the shareholders get to keep their dividends even if the company winds up getting crushed by the debt it took on to pay those dividends.
From a macro standpoint, however, the trend toward further corporate leverage for purely financial reasons, if it continues, will be disastrous. With the government borrowing record amounts of money, even if the current trend towards greater savings by households proves more than an evanescent fluke (It won’t.), the last thing we need is more borrowing in the corporate sector.
This morning’s (i.e., Monday, 10/5/19’s) Wall Street Journal reports on the increasing trend of corporations’ borrowing not to invest in operations, or even to buy other companies, but, rather, to pay dividends, often special (i.e., one time, and usually very large) dividends, to shareholders. Such leveraging up to reward the shareholders was quite the rage in the past, especially for companies whose shareholders were private equity firms who, of course, were interested primarily in restoring the “competitiveness” of, and rooting out the waste in, the companies they acquired. Financial engineering, we were assured, was a mere afterthought, if it entered into the thought processes of the private equity wunderkinds at all. The Journal article cited the case of Dex Media, which borrowed heavily to pay a special dividends to its private equity owners, including Thomas H. Lee Partners, Bain Capital, and the Blackstone Group (which recently announced plans to purchase SeaWorld—Orca meat, anyone?). Dex later filed bankruptcy because it could not service the debt it took on to pay these groups that did so much to enhance its competitiveness and keep management on its toes. Lee, Bain, and Blackstone kept the money.
In illustrating this atavistic trend toward stiffing bondholders to pay shareholders The Journal cited the case of TransDigm Group, Inc.’s decision to borrow $425mm to pay a $360mm special dividend to shareholders, increasing debt from 3.1 times EBIT (earnings before interest and taxes) to 4.3 times EBIT. The new debt will get a rating of B3, pretty close to the bottom rungs of the junk ladder. Good luck with that, TransDigm.
While all this might seem appalling, even to those like yours truly, who a long time ago made his living in the junk bond market, it is a natural response to public policy. The Bush/Obama administration, along with its flunky at the Fed, Obsequious Ben Bernanke, decided that the proper response to a crisis that arose from too much borrowing was to make it easier to borrow. The Fed drove interest rates on super safe short term treasuries to record lows. As the economy recovered, spreads tightened, allowing corporations relatively easy access to cheap money. The companies, faced with such cheap money, made a perfectly rational decision to lever up their balance sheets. So such leveraging makes sense from a micro standpoint, especially when, as is the case, the shareholders get to keep their dividends even if the company winds up getting crushed by the debt it took on to pay those dividends.
From a macro standpoint, however, the trend toward further corporate leverage for purely financial reasons, if it continues, will be disastrous. With the government borrowing record amounts of money, even if the current trend towards greater savings by households proves more than an evanescent fluke (It won’t.), the last thing we need is more borrowing in the corporate sector.
Friday, October 2, 2009
"BE CAREFUL WHAT YOU WISH FOR"
10/2/08
Not to detract from, indeed, perhaps expanding on, the points I made in the next (or last, depending on how one looks at it) post, the instantly seminal “C’MON; I NEVER THOUGHT HE’D LAST THAT LONG AGAINST CLAY!”…
Perhaps, instead of spelling Mayor Daley’s demise, as several ill-informed “pundits” and ordinary citizens have opined, the abject failure of Chicago’s 2016 Olympic bid may actually have given the Mayor a new lease on political life. Why? If Chicago 2016 had succeeded and it had turned into the financial and logistical nightmare that I, and several other clearly thinking people, expected, the repercussions for the Mayor would have been disastrous. Cost overruns, kinky contracts, outright silliness, prying national media, and “Whoops! We never saw that one comin’” surprises that naturally need the expensive help of a politically connected contractor, at great expense to the taxpayers (and not only Chicago taxpayers), would become as regular a feature of the Chicago landscape as the Picasso and the Sears (that’s right, the Sears) Tower. And all this would develop quickly; the guys who would be making money on the Olympics don’t like to wait. The citizenry, no longer mollified by the cheerleading media and the sycophantic civic community, would rise up and demand Rich Daley’s head on a stake. Under the circumstances wrought by this Olympian disaster, one could beat somebody with nobody. Remember Mayor Byrne? Sadly, I do, too.
There have long been at least two sides to enigmatic Rich Daley: the good government side and the thuggish, reward my friends and screw my enemies side. While the failure of the Olympics has doubtless disappointed those who have benefited from the latter, especially since Daley made it look like such a sure thing (See again today’s other post, “C’MON; I NEVER THOUGHT HE’D LAST THAT LONG AGAINST CLAY!”), not getting the Olympics may help Daley’s increasingly dormant good government side re-emerge, and thus re-endear him to the people of the city of Chicago. Okay, maybe not. But the Olympics surely would have driven the final stake in the heart of Good Government Rich, forcing the peasants to go after Thuggish Rich with proverbial pitchforks. And, remember, when the Wolfman died, Larry Talbot died with him.
Not to detract from, indeed, perhaps expanding on, the points I made in the next (or last, depending on how one looks at it) post, the instantly seminal “C’MON; I NEVER THOUGHT HE’D LAST THAT LONG AGAINST CLAY!”…
Perhaps, instead of spelling Mayor Daley’s demise, as several ill-informed “pundits” and ordinary citizens have opined, the abject failure of Chicago’s 2016 Olympic bid may actually have given the Mayor a new lease on political life. Why? If Chicago 2016 had succeeded and it had turned into the financial and logistical nightmare that I, and several other clearly thinking people, expected, the repercussions for the Mayor would have been disastrous. Cost overruns, kinky contracts, outright silliness, prying national media, and “Whoops! We never saw that one comin’” surprises that naturally need the expensive help of a politically connected contractor, at great expense to the taxpayers (and not only Chicago taxpayers), would become as regular a feature of the Chicago landscape as the Picasso and the Sears (that’s right, the Sears) Tower. And all this would develop quickly; the guys who would be making money on the Olympics don’t like to wait. The citizenry, no longer mollified by the cheerleading media and the sycophantic civic community, would rise up and demand Rich Daley’s head on a stake. Under the circumstances wrought by this Olympian disaster, one could beat somebody with nobody. Remember Mayor Byrne? Sadly, I do, too.
There have long been at least two sides to enigmatic Rich Daley: the good government side and the thuggish, reward my friends and screw my enemies side. While the failure of the Olympics has doubtless disappointed those who have benefited from the latter, especially since Daley made it look like such a sure thing (See again today’s other post, “C’MON; I NEVER THOUGHT HE’D LAST THAT LONG AGAINST CLAY!”), not getting the Olympics may help Daley’s increasingly dormant good government side re-emerge, and thus re-endear him to the people of the city of Chicago. Okay, maybe not. But the Olympics surely would have driven the final stake in the heart of Good Government Rich, forcing the peasants to go after Thuggish Rich with proverbial pitchforks. And, remember, when the Wolfman died, Larry Talbot died with him.
“C’MON; I NEVER THOUGHT HE’D LAST THAT LONG AGAINST CLAY!”
10/2/09
This morning, Chicagoans received the terrific news that they won’t have their pockets picked for the next seven or eight years in order to provide even more lucre for those who have already gotten rich, fat, and happy under the Daley administration. The lapdog, cheerleading news media in this town, sullen and down in the mouth in the wake of these developments, were reporting that, in the wake of the news, crowds in the Daley center were shocked and dejected. Some were so upset that they were crying “actual tears.” If such tears were shed by members of the crowd who actually think rather than chant slogans fed to them by the Mayor’s various propaganda organs, one can only conclude that these were tears of joy; we just dodged a MAJOR financial bullet. See, for example, my insightful 9/22/09 post “I GO TO RIO…”
Already, some pundits are saying that the demise of the Olympic bid means the demise of Mayor Richard M. Daley. I don’t think so. Yes, the Mayor’s approval rating is as low as it has ever been. Yes, he looks foolish (but perhaps not as foolish as the President) in the wake of having been shot down in the first round after, while not actually saying so, displaying a belief that Chicago 2016 was pretty much a done deal. And yes, John Kass made a good, though not unassailable, point when he indicated that the Olympics would keep Daley alive politically by providing a means of dispensing largesse to those who have supported him in an environment in which a depleted city treasury no longer provides such opportunities. However, talk of Daley’s being a “lame duck” or “finished politically” is premature, or perhaps downright wrong, for a number of reasons. As much as a lot of people understandably seem not to like Daley and the corruption and other shenanigans that have seemed endemic to at least the latter half of his mayoralty (but you wouldn’t know it by the 2007 election results), just take a look around the city. This city has never been cleaner, more beautiful, or more inviting. And the progress is not limited to downtown, as the Mayor’s detractors like to say. An old friend and I spent much of last Friday driving around the west side, in neighborhoods that one wouldn’t enter in broad daylight, heavily armed only ten or fifteen years ago. A few weeks before then, I diverted off the Stevenson onto King Drive on a trip to the Science and Industry Museum with my kids. The change in those neighborhoods is nothing less than stunning. As one with a somewhat libertarian viewpoint, I can’t attribute all this progress to the Administration, but, especially in a city like Chicago, where business and government are often indistinguishable, Mayor Daley has to get some credit. But even if you don’t buy the “Good for Chicago” argument, Daley seems safe for the mere fact that you can’t beat somebody with nobody. And right now, there is nobody around who can beat Daley, or at least nobody who can get the votes of two especially disgruntled, and necessary, constituencies, firefighters and police officers on the city’s far northwest and southwest sides.
The only sense in which Mayor Daley may be facing the end is that he might decide, in the wake of the miserable failure of his excellent Olympic adventure, not to run again, especially given the magnitude of other problems, including an empty treasury and the parking meter fiasco, facing the city. He’s been Mayor now for 20 years and, by the time 2011 rolls around, he will have served longer than his father, which one supposes was one of Richard II’s goals. Why put up with this any more, especially with, without the Olympics, he has few means to keep his supporters rolling in dough? Some more cynical, and more opposed to Daley, than I might argue that the whole reason for Rich Daley’s being Mayor falls apart if he no longer has means of doing “business” with his friends and supporters.
So, unless Daley decides not to run again, he is not political toast by any means because of the Olympics. But the failure of the Olympics certainly can’t help. As I pondered these developments this morning, an analogy so clear came to my mind that I had to recommend it to my readers, to wit:
To understand Daley’s position, rent the outstanding 1962 film, written by the until recently incomparable Rod Serling, Requiem for a Heavyweight. Early in the film, Luis “Mountain” Rivera (Anthony Quinn—no relation) goes seven (or maybe it was eight, but, in any case, far more than was expected) rounds against a very young fighter named, at the time, Cassius Clay, who played himself. Rivera’s crooked manager, Maish Rennick (Jackie Gleason), has bet heavily against his fighter, placing his bets through gangsters who, based on Maish’s assurances, bet that Mountain wouldn’t last more than three or four rounds.
The portion of the movie most relevant to this discussion comes very early: After Mountain lasts longer against Clay than Maish had predicted, the gangsters catch up with Maish, chasing him down an alley and finally cornering him in a boxing ring. They are very upset that Mountain lasted as long as he did, costing them lots of money. But they don’t kill Maish; instead, they give him a severe working over and warn him that there will be no next time.
Is Rich Daley, in the wake of his Olympic fiasco, Maish Rennick? Are the guys he has made rich, or richer (And, no, I’m not saying they’re gangsters. This is Chicago, so some of the guys behind Daley have somewhat, er, questionable pasts, but certainly such unsavory types are in the distinct minority among the beneficiaries of Daley’s (the taxpayers’ of Chicago, really.) beneficiaries.), leaving him on the ropes but giving him one just more chance?
This morning, Chicagoans received the terrific news that they won’t have their pockets picked for the next seven or eight years in order to provide even more lucre for those who have already gotten rich, fat, and happy under the Daley administration. The lapdog, cheerleading news media in this town, sullen and down in the mouth in the wake of these developments, were reporting that, in the wake of the news, crowds in the Daley center were shocked and dejected. Some were so upset that they were crying “actual tears.” If such tears were shed by members of the crowd who actually think rather than chant slogans fed to them by the Mayor’s various propaganda organs, one can only conclude that these were tears of joy; we just dodged a MAJOR financial bullet. See, for example, my insightful 9/22/09 post “I GO TO RIO…”
Already, some pundits are saying that the demise of the Olympic bid means the demise of Mayor Richard M. Daley. I don’t think so. Yes, the Mayor’s approval rating is as low as it has ever been. Yes, he looks foolish (but perhaps not as foolish as the President) in the wake of having been shot down in the first round after, while not actually saying so, displaying a belief that Chicago 2016 was pretty much a done deal. And yes, John Kass made a good, though not unassailable, point when he indicated that the Olympics would keep Daley alive politically by providing a means of dispensing largesse to those who have supported him in an environment in which a depleted city treasury no longer provides such opportunities. However, talk of Daley’s being a “lame duck” or “finished politically” is premature, or perhaps downright wrong, for a number of reasons. As much as a lot of people understandably seem not to like Daley and the corruption and other shenanigans that have seemed endemic to at least the latter half of his mayoralty (but you wouldn’t know it by the 2007 election results), just take a look around the city. This city has never been cleaner, more beautiful, or more inviting. And the progress is not limited to downtown, as the Mayor’s detractors like to say. An old friend and I spent much of last Friday driving around the west side, in neighborhoods that one wouldn’t enter in broad daylight, heavily armed only ten or fifteen years ago. A few weeks before then, I diverted off the Stevenson onto King Drive on a trip to the Science and Industry Museum with my kids. The change in those neighborhoods is nothing less than stunning. As one with a somewhat libertarian viewpoint, I can’t attribute all this progress to the Administration, but, especially in a city like Chicago, where business and government are often indistinguishable, Mayor Daley has to get some credit. But even if you don’t buy the “Good for Chicago” argument, Daley seems safe for the mere fact that you can’t beat somebody with nobody. And right now, there is nobody around who can beat Daley, or at least nobody who can get the votes of two especially disgruntled, and necessary, constituencies, firefighters and police officers on the city’s far northwest and southwest sides.
The only sense in which Mayor Daley may be facing the end is that he might decide, in the wake of the miserable failure of his excellent Olympic adventure, not to run again, especially given the magnitude of other problems, including an empty treasury and the parking meter fiasco, facing the city. He’s been Mayor now for 20 years and, by the time 2011 rolls around, he will have served longer than his father, which one supposes was one of Richard II’s goals. Why put up with this any more, especially with, without the Olympics, he has few means to keep his supporters rolling in dough? Some more cynical, and more opposed to Daley, than I might argue that the whole reason for Rich Daley’s being Mayor falls apart if he no longer has means of doing “business” with his friends and supporters.
So, unless Daley decides not to run again, he is not political toast by any means because of the Olympics. But the failure of the Olympics certainly can’t help. As I pondered these developments this morning, an analogy so clear came to my mind that I had to recommend it to my readers, to wit:
To understand Daley’s position, rent the outstanding 1962 film, written by the until recently incomparable Rod Serling, Requiem for a Heavyweight. Early in the film, Luis “Mountain” Rivera (Anthony Quinn—no relation) goes seven (or maybe it was eight, but, in any case, far more than was expected) rounds against a very young fighter named, at the time, Cassius Clay, who played himself. Rivera’s crooked manager, Maish Rennick (Jackie Gleason), has bet heavily against his fighter, placing his bets through gangsters who, based on Maish’s assurances, bet that Mountain wouldn’t last more than three or four rounds.
The portion of the movie most relevant to this discussion comes very early: After Mountain lasts longer against Clay than Maish had predicted, the gangsters catch up with Maish, chasing him down an alley and finally cornering him in a boxing ring. They are very upset that Mountain lasted as long as he did, costing them lots of money. But they don’t kill Maish; instead, they give him a severe working over and warn him that there will be no next time.
Is Rich Daley, in the wake of his Olympic fiasco, Maish Rennick? Are the guys he has made rich, or richer (And, no, I’m not saying they’re gangsters. This is Chicago, so some of the guys behind Daley have somewhat, er, questionable pasts, but certainly such unsavory types are in the distinct minority among the beneficiaries of Daley’s (the taxpayers’ of Chicago, really.) beneficiaries.), leaving him on the ropes but giving him one just more chance?
Thursday, October 1, 2009
“PEOPLE PUT ME DOWN ‘CAUSE THAT’S THE SIDE OF TOWN I WAS BORN IN”
10/1/09
This morning’s (i.e., Thursday, 10/1’s) Wall Street Journal reports that, after months (years now) of modifying home loans by reducing interest rates and extending terms, and not meeting much success doing so, banks and other loan servicers have begun reducing the principal on such loans with some degree of seriousness. Indeed, in the second quarter of 2009, 10% of loan modifications involved writing down principal, up from 3.1% in the first quarter of 2009.
The banks’ newfound enthusiasm for writing down loan principal springs partly from the utter failure of other types of modifications. The Journal reports that 28% of loans modified in the first quarter of this year were in default within three months. (THREE MONTHS!) But it’s even worse than that; 56% of loans modified in the second quarter of 2008 were in default again a year later. Maybe, the banks think, reducing principal will prove more effective. Good luck on that.
The real reason, though, for the banks’ ramping up principal reductions is, as the Journal reports, “…prodding from the Obama administration which has made saving homeowners from foreclosure a cornerstone of its economic rescue strategy.”
So let’s outline what’s going on here:
The Bush/Obama administration has shoveled billions of your dollars into banks and other financial institutions and effectively told them to use a substantial chunk of that money to modify home loans for those who bought more house than they could afford. Since initial efforts to keep “homeowners” in their houses have failed, further pressure from the Bush/Obama administration has resulted in these lenders’ forgiving principal on loans extended to people who bought too much house. Therefore, the net result is that the government is using the money of those prudent enough to live within their means to subsidize those who whose profligacy, silliness, economic illiteracy, and gormless desire for “status” led them to buy far more house than they could afford. Ironically, this Bush/Obama policy has, in many cases, resulted in your subsidizing your former neighbors who could no longer bear the ignominy of having to live in your neighborhood because those pathetic boondocks were not sufficiently “upscale” for their tastes.
More of your government at work.
This morning’s (i.e., Thursday, 10/1’s) Wall Street Journal reports that, after months (years now) of modifying home loans by reducing interest rates and extending terms, and not meeting much success doing so, banks and other loan servicers have begun reducing the principal on such loans with some degree of seriousness. Indeed, in the second quarter of 2009, 10% of loan modifications involved writing down principal, up from 3.1% in the first quarter of 2009.
The banks’ newfound enthusiasm for writing down loan principal springs partly from the utter failure of other types of modifications. The Journal reports that 28% of loans modified in the first quarter of this year were in default within three months. (THREE MONTHS!) But it’s even worse than that; 56% of loans modified in the second quarter of 2008 were in default again a year later. Maybe, the banks think, reducing principal will prove more effective. Good luck on that.
The real reason, though, for the banks’ ramping up principal reductions is, as the Journal reports, “…prodding from the Obama administration which has made saving homeowners from foreclosure a cornerstone of its economic rescue strategy.”
So let’s outline what’s going on here:
The Bush/Obama administration has shoveled billions of your dollars into banks and other financial institutions and effectively told them to use a substantial chunk of that money to modify home loans for those who bought more house than they could afford. Since initial efforts to keep “homeowners” in their houses have failed, further pressure from the Bush/Obama administration has resulted in these lenders’ forgiving principal on loans extended to people who bought too much house. Therefore, the net result is that the government is using the money of those prudent enough to live within their means to subsidize those who whose profligacy, silliness, economic illiteracy, and gormless desire for “status” led them to buy far more house than they could afford. Ironically, this Bush/Obama policy has, in many cases, resulted in your subsidizing your former neighbors who could no longer bear the ignominy of having to live in your neighborhood because those pathetic boondocks were not sufficiently “upscale” for their tastes.
More of your government at work.
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